Minnesota | 1-7945 | 41-0216800 |
(State or other jurisdiction | (Commission | (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
3680 Victoria St. North, Shoreview, Minnesota | 55126-2966 |
(Address of principal executive offices) | (Zip Code) |
99.1 | Press Release, dated July 24, 2014, of Deluxe Corporation reporting results from second quarter 2014. |
DELUXE CORPORATION | ||
/s/ Anthony C. Scarfone | ||
Anthony C. Scarfone | ||
Senior Vice President, | ||
General Counsel and Secretary |
99.1 | Press Release, dated July 24, 2014, of Deluxe Corporation reporting results from second quarter 2014 |
Deluxe Corporation P.O. Box 64235 St. Paul, MN 55164-0235 (651) 483-7111 |
NEWS RELEASE | For additional information: Ed Merritt Treasurer and VP Investor Relations (651) 787-1370 | |
DELUXE REPORTS SECOND QUARTER 2014 FINANCIAL RESULTS |
Revenue increases 6.3% and exceeds high end of outlook |
Diluted EPS of $0.99 increases 5.3%; adjusted EPS of $1.01 increases 5.2% exceeding high end of outlook |
Raises Full Year Outlook for Revenue and Adjusted EPS |
Q2 2014 | Q2 2013 | % Change | ||||||||
Revenue | $405.4 million | $381.4 million | 6.3 | % | ||||||
Net Income | $50.1 million | $48.2 million | 3.9 | % | ||||||
Diluted EPS – GAAP | $0.99 | $0.94 | 5.3 | % | ||||||
Adjusted Diluted EPS – Non-GAAP | $1.01 | $0.96 | 5.2 | % |
• | Revenue increased 6.3% year-over-year, with the strongest performance in the Small Business Services segment which grew 8.7%, followed by Financial Services which grew 6.5%. |
• | Revenue from marketing solutions and other services increased 19.7% year-over-year and accounted for 23.1% of total revenue in the quarter. |
• | Gross margin was 64.0% of revenue, down from 65.0% in the second quarter of 2013. The decline was primarily driven by a higher services revenue mix and higher delivery and material costs. |
• | Selling, general and administrative (SG&A) expense increased 5.5% from last year primarily due to additional SG&A expense from acquisitions and higher performance-based compensation and medical costs. SG&A as a percent of revenue was 42.8% in the quarter compared to 43.1% of revenue last year. |
• | Operating income increased 3.0% year-over-year and includes restructuring and transaction-related costs in both periods. Adjusted operating income, which excludes these items, increased 2.3% year-over-year from higher revenue per order and continued cost reductions partially offset by higher performance-based compensation and medical costs. |
• | Diluted EPS increased 5.3% year-over-year driven primarily by stronger operating performance and lower shares outstanding. |
• | Revenue was $273.8 million and increased 8.7% year-over-year due to growth in marketing solutions and other services, which includes the results of VerticalReponse acquired in June 2013, growth in the Safeguard® distributor channel and the impact of price increases. |
• | Operating income increased 5.6% from last year to $48.8 million. Adjusted operating income, which excludes restructuring and transaction-related costs, increased 4.9% year-over-year due primarily to higher revenue and cost reductions. |
• | Revenue was $88.5 million and increased 6.5% year-over-year due to price increases and growth in non-check services, including the results of Destination Rewards which was acquired late in the fourth quarter of 2013. These increases were partially offset by the secular decline in check usage. |
• | Operating income increased 3.2% from last year to $22.3 million. Adjusted operating income, which excludes restructuring and transaction-related costs, increased 2.7% year-over-year, reflecting price increases and the continued benefits of cost reductions, partially offset by check usage declines and acquisition-related costs. |
• | Revenue of $43.1 million declined 7.3% year-over-year due primarily to the secular decline in check usage. |
• | Operating income declined 5.4% year-over-year as a result of lower revenue, partially offset by cost reductions. |
• | Cash provided by operating activities for the first half of 2014 was $125.8 million, an increase of $23.7 million compared to 2013, driven primarily by changes in working capital, improved earnings, and lower medical and performance-based compensation payments, partially offset by higher income tax payments. |
• | The Company repurchased $20.0 million of common stock in open market transactions in the second quarter and $52.0 million year-to-date. |
Third Quarter 2014: | Current Outlook (7/24/2014) | ||
Revenue | $406 to $414 million | ||
Diluted EPS – GAAP | $0.96 to $1.01 | ||
Adjusted Diluted EPS – Non-GAAP | $0.97 to $1.02 |
Full Year 2014: | Prior Outlook (4/24/2014) | Current Outlook (7/24/2014) | |
Revenue | $1.620 to $1.650 billion | $1.635 to $1.655 billion | |
Marketing Solutions and Other Services Revenue | $400 to $410 million | $400 to $410 million | |
Diluted EPS – GAAP | $3.90 to $4.05 | $3.96 to $4.06 | |
Adjusted Diluted EPS – Non-GAAP | $3.97 to $4.12 | $4.04 to $4.14 | |
Operating Cash Flow | $270 to $280 million | $270 to $280 million | |
Capital Expenditures | approx. $40 million | approx. $40 million | |
Depreciation and Amortization | approx. $64 million | approx. $66 million | |
Effective Tax Rate | approx. 34% | approx. 34% |
• | A live conference call will be held today at 11:00 a.m. ET (10:00 a.m. CT) to review the financial results. Listeners can access the call by dialing 1-617-399-5127 (access code 99623544). A presentation also will be available via a simultaneous webcast on our investor relations website at www.deluxe.com/investor. |
• | Alternatively, an audio replay of the call will be available through midnight on August 1st by calling 1-617-801-6888 (access code 46510457). |
Actual | |||||||
Q2 2014 | Q2 2013 | ||||||
Adjusted Diluted EPS | $1.01 | $0.96 | |||||
Restructuring-related costs | (0.01 | ) | (0.01 | ) | |||
Transaction-related costs | (0.01 | ) | (0.01 | ) | |||
Reported Diluted EPS | $0.99 | $0.94 |
Outlook | |||||
Q3 2014 | Full Year 2014 | ||||
Adjusted Diluted EPS | $0.97 to $1.02 | $4.04 to $4.14 | |||
Restructuring-related costs | (0.01 | ) | (0.07 | ) | |
Transaction-related costs | — | (0.01 | ) | ||
Reported Diluted EPS | $0.96 to $1.01 | $3.96 to $4.06 |
Quarter Ended June 30, | |||||||||||||
2014 | 2013 | ||||||||||||
Product revenue | $344.5 | $332.8 | |||||||||||
Service revenue | 60.9 | 48.6 | |||||||||||
Total revenue | 405.4 | 381.4 | |||||||||||
Cost of products | (119.6 | ) | (29.5 | %) | (111.4 | ) | (29.2 | %) | |||||
Cost of services | (26.3 | ) | (6.5 | %) | (22.1 | ) | (5.8 | %) | |||||
Total cost of revenue | (145.9 | ) | (36.0 | %) | (133.5 | ) | (35.0 | %) | |||||
Gross profit | 259.5 | 64.0 | % | 247.9 | 65.0 | % | |||||||
Selling, general and administrative expense | (173.5 | ) | (42.8 | %) | (164.5 | ) | (43.1 | %) | |||||
Net restructuring charges | (1.0 | ) | (0.2 | %) | (0.9 | ) | (0.2 | %) | |||||
Operating income | 85.0 | 21.0 | % | 82.5 | 21.6 | % | |||||||
Interest expense | (9.5 | ) | (2.3 | %) | (9.6 | ) | (2.5 | %) | |||||
Other income | 0.3 | 0.1 | % | 0.1 | — | % | |||||||
Income before income taxes | 75.8 | 18.7 | % | 73.0 | 19.1 | % | |||||||
Income tax provision | (25.7 | ) | (6.3 | %) | (24.8 | ) | (6.5 | %) | |||||
Net income | $50.1 | 12.4 | % | $48.2 | 12.6 | % | |||||||
Weighted average dilutive shares outstanding | 50.2 | 51.0 | |||||||||||
Diluted earnings per share | $0.99 | $0.94 | |||||||||||
Capital expenditures | $8.9 | $8.3 | |||||||||||
Depreciation and amortization expense | 16.4 | 16.1 | |||||||||||
Number of employees-end of period | 5,418 | 5,460 | |||||||||||
Non-GAAP financial measure - EBITDA(1) | $101.7 | $98.7 | |||||||||||
Non-GAAP financial measure - Adjusted EBITDA(1) | 102.9 | 100.5 |
Quarter Ended June 30, | |||||||
2014 | 2013 | ||||||
Adjusted EBITDA | $102.9 | $100.5 | |||||
Restructuring-related costs | (0.9 | ) | (1.1 | ) | |||
Transaction-related costs | (0.3 | ) | (0.7 | ) | |||
EBITDA | 101.7 | 98.7 | |||||
Income tax provision | (25.7 | ) | (24.8 | ) | |||
Interest expense | (9.5 | ) | (9.6 | ) | |||
Depreciation and amortization expense | (16.4 | ) | (16.1 | ) | |||
Net income | $50.1 | $48.2 |
Six Months Ended June 30, | |||||||||||||
2014 | 2013 | ||||||||||||
Product revenue | $690.2 | $672.7 | |||||||||||
Service revenue | 122.2 | 96.3 | |||||||||||
Total revenue | 812.4 | 769.0 | |||||||||||
Cost of products | (238.0 | ) | (29.3 | %) | (223.8 | ) | (29.1 | %) | |||||
Cost of services | (52.9 | ) | (6.5 | %) | (43.1 | ) | (5.6 | %) | |||||
Total cost of revenue | (290.9 | ) | (35.8 | %) | (266.9 | ) | (34.7 | %) | |||||
Gross profit | 521.5 | 64.2 | % | 502.1 | 65.3 | % | |||||||
Selling, general and administrative expense | (351.4 | ) | (43.3 | %) | (339.6 | ) | (44.2 | %) | |||||
Net restructuring charges | (4.3 | ) | (0.5 | %) | (2.3 | ) | (0.3 | %) | |||||
Operating income | 165.8 | 20.4 | % | 160.2 | 20.8 | % | |||||||
Interest expense | (19.1 | ) | (2.4 | %) | (19.1 | ) | (2.5 | %) | |||||
Other income | 0.5 | 0.1 | % | 0.5 | 0.1 | % | |||||||
Income before income taxes | 147.2 | 18.1 | % | 141.6 | 18.4 | % | |||||||
Income tax provision | (49.8 | ) | (6.1 | %) | (47.6 | ) | (6.2 | %) | |||||
Net income | $97.4 | 12.0 | % | $94.0 | 12.2 | % | |||||||
Weighted average dilutive shares outstanding | 50.5 | 51.1 | |||||||||||
Diluted earnings per share | $1.92 | $1.83 | |||||||||||
Capital expenditures | $19.9 | $16.6 | |||||||||||
Depreciation and amortization expense | 32.6 | 32.0 | |||||||||||
Number of employees-end of period | 5,418 | 5,460 | |||||||||||
Non-GAAP financial measure - EBITDA(1) | $198.9 | $192.7 | |||||||||||
Non-GAAP financial measure - Adjusted EBITDA(1) | 204.0 | 195.9 |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
Adjusted EBITDA | $204.0 | $195.9 | |||||
Restructuring-related costs | (4.5 | ) | (2.5 | ) | |||
Transaction-related costs | (0.3 | ) | (0.7 | ) | |||
Asset impairment charge | (0.3 | ) | — | ||||
EBITDA | 198.9 | 192.7 | |||||
Income tax provision | (49.8 | ) | (47.6 | ) | |||
Interest expense | (19.1 | ) | (19.1 | ) | |||
Depreciation and amortization expense | (32.6 | ) | (32.0 | ) | |||
Net income | $97.4 | $94.0 |
June 30, 2014 | December 31, 2013 | June 30, 2013 | |||||||||
Cash and cash equivalents | $146.9 | $121.1 | $52.8 | ||||||||
Other current assets | 197.3 | 198.2 | 177.0 | ||||||||
Property, plant & equipment-net | 96.8 | 101.3 | 100.8 | ||||||||
Intangibles-net | 154.4 | 153.6 | 153.5 | ||||||||
Goodwill | 823.0 | 822.8 | 810.4 | ||||||||
Other non-current assets | 218.0 | 172.5 | 153.5 | ||||||||
Total assets | $1,636.4 | $1,569.5 | $1,448.0 | ||||||||
Current portion of long-term debt | $254.8 | $255.6 | $0.3 | ||||||||
Other current liabilities | 231.7 | 234.4 | 201.9 | ||||||||
Long-term debt | 391.2 | 385.1 | 642.2 | ||||||||
Deferred income taxes | 84.6 | 82.8 | 78.0 | ||||||||
Other non-current liabilities | 92.3 | 61.1 | 45.1 | ||||||||
Shareholders' equity | 581.8 | 550.5 | 480.5 | ||||||||
Total liabilities and shareholders' equity | $1,636.4 | $1,569.5 | $1,448.0 | ||||||||
Shares outstanding | 49.8 | 50.3 | 50.4 |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
Cash provided (used) by: | |||||||
Operating activities: | |||||||
Net income | $97.4 | $94.0 | |||||
Depreciation and amortization of intangibles | 32.6 | 32.0 | |||||
Contract acquisition payments | (4.3 | ) | (5.8 | ) | |||
Other | 0.1 | (18.1 | ) | ||||
Total operating activities | 125.8 | 102.1 | |||||
Investing activities: | |||||||
Purchases of capital assets | (19.9 | ) | (16.6 | ) | |||
Payments for acquisitions | (8.9 | ) | (35.1 | ) | |||
Proceeds from company-owned life insurance policies | 0.8 | 4.6 | |||||
Other | 0.2 | 1.4 | |||||
Total investing activities | (27.8 | ) | (45.7 | ) | |||
Financing activities: | |||||||
Net change in debt | (0.6 | ) | — | ||||
Dividends | (27.7 | ) | (25.4 | ) | |||
Share repurchases | (51.9 | ) | (32.0 | ) | |||
Shares issued under employee plans | 7.1 | 9.4 | |||||
Other | 1.0 | 1.0 | |||||
Total financing activities | (72.1 | ) | (47.0 | ) | |||
Effect of exchange rate change on cash | (0.1 | ) | (2.0 | ) | |||
Net change in cash and cash equivalents | 25.8 | 7.4 | |||||
Cash and cash equivalents: Beginning of period | 121.1 | 45.4 | |||||
Cash and cash equivalents: End of period | $146.9 | $52.8 |
Quarter Ended June 30, | |||||||
2014 | 2013 | ||||||
Revenue: | |||||||
Small Business Services | $273.8 | $251.8 | |||||
Financial Services | 88.5 | 83.1 | |||||
Direct Checks | 43.1 | 46.5 | |||||
Total | $405.4 | $381.4 | |||||
Operating income: (1) | |||||||
Small Business Services | $48.8 | $46.2 | |||||
Financial Services | 22.3 | 21.6 | |||||
Direct Checks | 13.9 | 14.7 | |||||
Total | $85.0 | $82.5 | |||||
Operating margin: (1) | |||||||
Small Business Services | 17.8 | % | 18.3 | % | |||
Financial Services | 25.2 | % | 26.0 | % | |||
Direct Checks | 32.3 | % | 31.6 | % | |||
Total | 21.0 | % | 21.6 | % |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
Revenue: | |||||||
Small Business Services | $543.6 | $500.2 | |||||
Financial Services | 177.6 | 170.2 | |||||
Direct Checks | 91.2 | 98.6 | |||||
Total | $812.4 | $769.0 | |||||
Operating income: (1) | |||||||
Small Business Services | $92.4 | $84.8 | |||||
Financial Services | 43.9 | 44.5 | |||||
Direct Checks | 29.5 | 30.9 | |||||
Total | $165.8 | $160.2 | |||||
Operating margin: (1) | |||||||
Small Business Services | 17.0 | % | 17.0 | % | |||
Financial Services | 24.7 | % | 26.1 | % | |||
Direct Checks | 32.3 | % | 31.3 | % | |||
Total | 20.4 | % | 20.8 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Small Business Services | $0.9 | $1.2 | $3.6 | $1.9 | |||||||||||
Financial Services | 0.3 | 0.4 | 1.0 | 0.9 | |||||||||||
Direct Checks | — | 0.2 | 0.2 | 0.4 | |||||||||||
Total | $1.2 | $1.8 | $4.8 | $3.2 |
Quarter Ended June 30, | |||||||
2014 | 2013 | ||||||
Adjusted operating income: (1) | |||||||
Small Business Services | $49.7 | $47.4 | |||||
Financial Services | 22.6 | 22.0 | |||||
Direct Checks | 13.9 | 14.9 | |||||
Total | $86.2 | $84.3 | |||||
Adjusted operating margin: (1) | |||||||
Small Business Services | 18.2 | % | 18.8 | % | |||
Financial Services | 25.5 | % | 26.5 | % | |||
Direct Checks | 32.3 | % | 32.0 | % | |||
Total | 21.3 | % | 22.1 | % |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
Adjusted operating income: (1) | |||||||
Small Business Services | $96.0 | $86.7 | |||||
Financial Services | 44.9 | 45.4 | |||||
Direct Checks | 29.7 | 31.3 | |||||
Total | $170.6 | $163.4 | |||||
Adjusted operating margin: (1) | |||||||
Small Business Services | 17.7 | % | 17.3 | % | |||
Financial Services | 25.3 | % | 26.7 | % | |||
Direct Checks | 32.6 | % | 31.7 | % | |||
Total | 21.0 | % | 21.2 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Adjusted operating income | $86.2 | $84.3 | $170.6 | $163.4 | |||||||||||
Restructuring and transaction-related costs: | |||||||||||||||
Small Business Services | (0.9 | ) | (1.2 | ) | (3.6 | ) | (1.9 | ) | |||||||
Financial Services | (0.3 | ) | (0.4 | ) | (1.0 | ) | (0.9 | ) | |||||||
Direct Checks | — | (0.2 | ) | (0.2 | ) | (0.4 | ) | ||||||||
Total | (1.2 | ) | (1.8 | ) | (4.8 | ) | (3.2 | ) | |||||||
Reported operating income | $85.0 | $82.5 | $165.8 | $160.2 |